Tag Archives: Illinois Policy Institute

Democratic Cook County Board President Toni Preckwinkle, speaking at a Cook County tele townhall event last month, endorsed austerity measures in the pension system that will likely be received with cheer by budget hawks but will rankle many of the County’s employees. Preckwinkle’s statements put her to the right of recent conservative heroes like Wisconsin Governor Scott Walker and New Jersey Governor Chris Christie, as she suggested drastic steps even those two never suggested.

Preckwinkle called the current pension’s fiscal path unsustainable. Preckwinkle explained that an unwritten rule had government employees receiving smaller salaries while receiving generous benefits: including health care and pension.

“What happened over time, largely because of union organizing, is that salaries went up but we still had good benefits.” She continued, “now we’re in a situation where those generous benefits are extremely expensive to government. The deal between government and employee has broken down.”

Preckwinkle went on to assert that government employees have more generous benefits than their counter parts in the private sector. One difference, Preckwinkle explained was the defined benefit pension that employees like those in Cook County have. In the private sector, most employees have 401K plans, which are referred to as defined contribution.

In a defined benefit program, the employee is guaranteed a monthly income upon retirement based on their years of service and salary
earned. In a defined contribution plan, the employee sets away a defined amount monthly and it grows based on the rate of investments in each employee’s portfolio.

Preckwinkle explained that “we have to renegotiate the deal,” continuing, “workers will have to pay more.” Preckwinkle then said that if contributions aren’t renegotiated, the County pension system should be transformed into one that mirrors a 401K system. The defense department recently came under great controversy when it revealed that it was studying a similar idea.

Even Walker and Christie, who earned conservative adulation and union ire for their pension reforms, never suggested their state’s pension system be transformed into a 401K like system.

This is sure to rile up many of the union employees currently working for Cook County. At a recent Cook County Board meeting, Henry Bayer of the American Federation of State and Municipal Employees said, “”It’s not that benefits are too generous,” continuing, “This is a funding problem.” Adam Rosen, spokesperson for the local Service Employees International Union which represents about 2500 Cook County employees, declined to comment about Preckwinkle’s assertion.

Ted Dabrowski of the conservative leaning Illinois Policy Institute, said he wasn’t surprised by the progressive Preckwinkle taking such a fiscally hawkish stance. “She looked at the fiscal landscape of the county and saw there were no other options.” Dabrowski said that the State of Michigan, in the 1990’s, went to a 401K style plan and said it saved the state millions.

The Cook County government currently pays $190 million yearly in pension contributions out of a total budget of $3.5 billion. Jack Fitzgerald, President of the Cook County Pension Fund, said that the number would need to triple in order to keep it sustainable.

A recent report said that the unfunded liabilities in the pension are $5 billion and the County only has 60% of its long term liabilities paid for with current assets. Another report said the pension system will run out of money entirely in the year 2038.

While Preckwinkle’s statements are sure to cause controversy all around the largely blue state of Illinois, it’s unclear what will happen to the pension system going forward. That’s because all government pension funds in the state of Illinois are under the perview of the State legislature. Furthermore, the Cook County Pension Fund is governed by its own board. A bill to reform the system has languished in the State legislature for nearly a year.

As a commenter points out, the attribution to Governor Christie is inaccurate. The article should read that neither Christie nor Governor Walker were able to pass a 401K pension reform in their states.